Cost overruns continue to hit construction companies

2023-10-30 17:55:03

Construction continues to drown in a sea of ​​cost overruns. The increase in the prices of materials does not stop and neither do the cost overruns. According to data collected by the association of unlisted construction companies (ANCI), the average extra cost in works since January 2021 derived from the increase in the prices of materials and energy ranges between 16% and 26%.

As ANCI explains in its report, since mid-2020 raw materials and energy have experienced “an exorbitant price increase”, reaching maximum values ​​in mid-2022, after the increase in the cost index of the construction sector was higher than accumulated in the previous fifteen years, according to ANCI, which estimates them at between 50% and 90% compared to the values ​​at the beginning of 2021. In the second half of last year, these costs began to decrease. go down slowly. However, some materials began a new upward path in mid-2023. Thus, the employers’ association assures that, in August of this year, the price of aluminum remained 35% above what it was in January 2021, bituminous materials, 54%; cement, 40%; energy, 46%; ceramic materials, 48%; and steel workers, 33%.

ANCI has recalled that in March 2023 a decree came into force with an exceptional price review regime to try to address the strong upward spiral in materials. However, “a year and a half after its activation, the limits in its design, the disparity of criteria and interpretations at the time of its application and the negative administrative silence that certain contracting bodies are accepting have greatly reduced the effectiveness of this extent”.

Manpower of labour

But materials are the only costs that have increased for construction companies. The labor force has also done so in a notable way. According to ANCI, the National Construction Labor Index shows an increase of 11% between January 2021 and December 2022 “without any possibility of review in the contracts in execution that are suffering this impact.” As the employers’ association recalls, these increases “are being assumed entirely by companies that have public contracts in execution”, which constitutes a significant burden on their accounts. Therefore, they demand the possibility of including some type of mechanism that could help reduce the impact of this expense.

By type of works, road works (25% since January 2021) are, on average, the most affected by cost overruns, followed by airports (20%), ports (18%) and railways (17% ). The list is closed by hydraulics and construction, with 15% in both cases.